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Quality communication via cheap-talk messages in experimental auctions
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- Authors
- Issue Date
- 2023-08
- Publisher
- Elsevier BV
- Citation
- Journal of Economic Behavior and Organization, Vol.212, pp.74-107
- Abstract
- This paper examines the incentives of low-quality sellers to truthfully communicate their product quality in an environment where high-quality sellers cannot fully separate them-selves. Private information about the product's quality can be conveyed through cheap-talk messages, and products are sold in one of four auction formats: first-price (FPA), second -price (SPA), all-pay (APA), or sealed-bid double auctions (DA). Our study finds that low -quality sellers can benefit from honestly communicating their quality under certain cir-cumstances, such as in risky auction formats (DA and APA) and when there is a low prior probability of high-quality products. We also observe that low-quality claims can be more profitable, regardless of the competitiveness of the environment. Finally, we demonstrate that sellers' ability to set reservation prices does not improve communication regarding product quality.& COPY; 2023 Elsevier B.V. All rights reserved.
- ISSN
- 0167-2681
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